Tesla sharply lowered the price of Model 3 and Model Y in China for the second time in three months

Tesla Model 3 electric car is produced at Tesla’s Shanghai plant in China. (2 December 2019)

WASHINGTON — Tesla cut prices for electric vehicles made in China for the second time in less than three months on Friday, further increasing discounts in the world’s largest auto market as competition intensifies and demand prospects dim.

According to Reuters calculations, the latest price cuts, combined with the October price cut and various offers of up to 10,000 yuan to Chinese buyers over the past three months, have seen Tesla’s price drop by 13% to 24% compared to September.

On Friday, the U.S. automaker cut the price of all versions of its Model 3 and Model Y cars in China by 6 to 13.5 percent, based on prices displayed on Tesla’s China website. For example, the starting price of the Model 3 dropped from $265,900 to $229,900 ($33,427).

Earlier, data from industry associations showed that Tesla delivered 55,796 Chinese-made electric vehicles in December, down 44% from November and 21% from a year ago. In order to cope with the rise in inventory, Tesla must not reduce production and prices.

Just a few days ago, the Chinese government ended a subsidy program to help create the world’s largest market for electric vehicles. Weak demand forced Tesla and its rivals to bear the brunt of the decision to maintain sales.

The U.S. electric car maker also faces increasing competition from Chinese rivals. The Model 3 and Y are the only models the company has delivered in China, though on Friday Tesla announced prices for the Model S and Model X in China.

Data from China Merchants Bank shows that BYD’s retail sales in China doubled in December, while Tesla’s retail sales fell 42 percent. BYD has a much larger product range, including plug-in hybrids and pure electric vehicles.

Reuters calculations show that Model 3 and Model Y prices in China are currently 24 to 32 percent lower than Tesla’s largest market, the United States, due to different material and labor costs.

According to Tesla’s official website, the Model S and Model X are priced at 1,009,900 yuan and 1,039,900 yuan respectively in China, nearly 10% higher than the price in the United States.

Tesla has previously said it will begin deliveries to Chinese customers in the first half of this year of two high-end models, imported from the United States and affected by China’s 15% tariffs.

(This article is based on a Reuters report.)